Ireland Plays Down Chance of Promissory Note Agreement This Month

Irish government ministers Friday played down the chance of reaching agreement by the end of the month on the rescheduling of payments on promissory notes used to bail out two failed banks over three years ago.

The government has been in talks for months with the European Union, the European Central Bank and the International Monetary Fund on rescheduling the notes, which were pledged for Anglo Irish Bank Corp. and Irish Nationwide Building Society–now jointly renamed the Irish Bank Resolution Corp.–allowing the banks to qualify for emergency loans from the Central Bank of Ireland.

The next payment of €3.1 billion ($4.06 billion) on the notes is due March 31.

But in an interview in Sydney, Ireland’s Justice and Defence Minister Alan Shatter said that it was unlikely the matter would be resolved by that date.

“I think it’s an issue that could continue into the autumn of this year,” Mr. Shatter said in an interview.

He stressed that while the government was seeking to extend the payment schedule and to agree on a reduced interest rate, the debt would be paid in full.

“There is no question of an Irish default, it is simply not going to happen. It is not something contemplated, it’s not something that would be acceptable to us,” Mr. Shatter said. “We will meet the obligations we have in the context of March 31.”

Irish Budget Minister Brendan Howlin, currently visiting Singapore, also said that no timeframe had been set on concluding the talks.

He said he believed a technical paper by the European Commission, ECB and IMF on the subject was close to completion, but that there would subsequently still need to be engagement with the “political dimension” of the Commission and governors of Europe’s central banks.

“The issue that we’re working on that the technical paper would concern itself with is the entirety of the promissory note issue, which is of the order of €47 billion rather the €3 billion that are due imminently,” Mr. Howlin said.

“Obviously the two are interrelated and if there was agreement on the major issue substantively, whether that could be done [by March 31] is a matter of conjecture, but it’s not something that we’ve put timelines on. Then the immediate payment comes into focus and how that’s to be addressed, but no decisions have been made at all on any of those matters.”

Irish Finance Minister Michael Noonan on Thursday refused to rule out the possibility of reaching agreement within the month, pointing out in an interview with Irish-owned state broadcaster RTE “that very often things go right up to the end.”

Mr. Howlin also said Friday that whether or not agreement was reached on the subject by the end of the month would not be a factor in determining the timing of Ireland’s referendum on the EU’s new fiscal pact.